7.3 billion - Citigroup

Key Assumptions and Retained Interests—Citi HoldingsThe key assumptions, used for the securitization of CDOs andCLOs during the quarter ended March 31, 2012, in measuringthe fair value of retained interests were as follows:CDOsCLOsDiscount rate 46.9% to 51.6% 4.1% to 4.5%The effect of an adverse change of 10% and 20% in thediscount rates used to determine the fair value of retainedinterests is set forth in the table below:The following table summarizes selected cash flowinformation related to asset-based financings for the quartersended March 31, 2012 and 2011:In billions of dollars 2012 2011Cash flows received on retainedinterests and other net cash flows $0.9 $0.5The effect of an adverse change of 10% and 20% in thediscount rates used to determine the fair value of retainedinterests at March 31, 2012 is set forth in the table below:In millions of dollars CDOs CLOsCarrying value of retained interests $ 14 $142Discount ratesAdverse change of 10% $ (2) $ (5)Adverse change of 20% (3) (11)Asset-Based FinancingThe Company provides loans and other forms of financing toVIEs that hold assets. Those loans are subject to the same creditapprovals as all other loans originated or purchased by theCompany. Financings in the form of debt securities orderivatives are, in most circumstances, reported in Tradingaccount assets and accounted for at fair value through earnings.The Company generally does not have the power to direct theactivities that most significantly impact these VIEs‘ economicperformance and thus it does not consolidate them.Asset-Based Financing—CiticorpThe primary types of Citicorp‘s asset-based financings, totalassets of the unconsolidated VIEs with significant involvementand the Company‘s maximum exposure to loss at March 31,2012, are shown below. For the Company to realize thatmaximum loss, the VIE (borrower) would have to default withno recovery from the assets held by the VIE.In billions of dollarsTotalassetsMaximumexposureTypeCommercial and other real estate $ 3.5 $ 1.4Hedge funds and equities 5.2 2.3Airplanes, ships and other assets 10.1 9.1Total $ 18.8 $ 12.8Asset-Based Financing—Citi HoldingsThe primary types of Citi Holdings‘ asset-based financings, totalassets of the unconsolidated VIEs with significant involvementand the Company‘s maximum exposure to loss at March 31,2012, are shown below. For the Company to realize thatmaximum loss, the VIE (borrower) would have to default withno recovery from the assets held by the VIE.In billions of dollarsTotalassetsMaximumExposureTypeCommercial and other real estate $ 1.7 $ 0.4Corporate loans 3.7 3.0Airplanes, ships and other assets 1.8 0.6Total $ 7.2 $ 4.0147CITIGROUP – 2012 FIRST QUARTER 10-QAsset-basedIn millions of dollarsfinancingCarrying value of retained interests $3,022Value of underlying portfolioAdverse change of 10% $ —Adverse change of 20% —Municipal Securities Tender Option Bond (TOB) TrustsTOB trusts hold fixed- and floating-rate, taxable and tax-exemptsecurities issued by state and local governments andmunicipalities. The trusts are typically single-issuer trusts whoseassets are purchased from the Company or from other investorsin the municipal securities market. The TOB trusts fund thepurchase of their assets by issuing long-term, putable floatingrate certificates (Floaters) and residual certificates (Residuals).The trusts are referred to as TOB trusts because the Floaterholders have the ability to tender their interests periodicallyback to the issuing trust, as described further below. TheFloaters and Residuals evidence beneficial ownership interestsin, and are collateralized by, the underlying assets of the trust.The Floaters are held by third-party investors, typically taxexemptmoney market funds. The Residuals are typically heldby the original owner of the municipal securities being financed.The Floaters and the Residuals have a tenor that is equal toor shorter than the tenor of the underlying municipal bonds. TheResiduals entitle their holders to the residual cash flows fromthe issuing trust, the interest income generated by the underlyingmunicipal securities net of interest paid on the Floaters and trustexpenses. The Residuals are rated based on the long-term ratingof the underlying municipal bond. The Floaters bear variableinterest rates that are reset periodically to a new market ratebased on a spread to a high grade, short-term, tax-exempt index.The Floaters have a long-term rating based on the long-termrating of the underlying municipal bond and a short-term ratingbased on that of the liquidity provider to the trust.There are two kinds of TOB trusts: customer TOB trustsand non-customer TOB trusts. Customer TOB trusts are truststhrough which customers finance their investments in municipalsecurities. The Residuals are held by customers and the Floatersby third-party investors, typically tax-exempt money marketfunds. Non-customer TOB trusts are trusts through which theCompany finances its own investments in municipal securities.In such trusts, the Company holds the Residuals and third-partyinvestors, typically tax-exempt money market funds, hold theFloaters.The Company serves as remarketing agent to the trusts,placing the Floaters with third-party investors at inception,facilitating the periodic reset of the variable rate of interest onthe Floaters and remarketing any tendered Floaters. If Floaters